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BAE TO END JV TIE UP IN INDIA

14 Feb 13. Uncertainty over India’s $11 billion Futuristic Infantry
Combat Vehicle (FICV) and 155mm/52 calibre gun project was the reason behind BAE Systems of United Kingdom deciding to end its equity based relations with India’s Mahindra & Mahindra. The two companies had forged an alliance in 2009 to form a land based defence company named Mahindra Defence Systems in which India’s Mahindra & Mahindra kept 74 per cent equity and the remaining 26 per cent was kept by BAE Systems of United Kingdom.

BAE Systems decided to sell also its 26 per cent its equity to Mahindra Defence systems at a price to be decided later and the decision was a strategic decision said an executive of Mahindra Defence Systems.

Mahindra Defence Systems is engaged in the development of military vehicles and the company had plans to be involved in a number of future artillery programme including the M777 lightweight howitzer and the FH77B 155mm howitzer and the FICV program added the executive.

The two companies have however not snapped their ties and the executive said the two companies will explore the opportunities in the Indian market independently. However, sources in BAE Systems said the main charm of entering India was the $11 FICV and the potential 155mm/52 calibre gun project which is not uncertain. For the last two years the file on FICV is kept on the shelf and no decision has yet been taken whether to include private sector automobile companies. Similarly for the 155mm/52 calibre gun project no open tender has yielded any result and the gun is being developed by Ordnance Factories Board and also the Defence Research and Development Organization along with domestic defence major Tata SED and Bharat Forge. BAE Systems was also keen to increase its equity holding in the Indian joint venture to more than 49 per cent but the Indian law was not allowing this and despite repeated representations to the Indian defence ministry the Indian government is firm on keeping the equity holdings of overseas companies to only 26 per cent said an official of India’s lobbying agency, Associated Chambers of Commerce and Industries.

FICV

The four domestic auto majors, Tata Motors, Mahindra Defence Systems, Larsen & Toubro and state owned Ordnance Factories Board are competing for the FICV project in which the Indian Army will buy around 3000 vehicles over the next two decades. FICV is the first Make category program. Under this proposal two original equipment manufacturers [OEMs] will be selected and charged with the responsibility to produce prototypes in a record time of about 3 years. Major part of the design and development project will be funded by the Indian defence ministry, with the selected OEMs expected to pool in with about 20 per cent of the overall cost.

The Indian Army proposes to design and build nearly 3000 tracked FICV to replace the Indian Army’s aging fleet of Russian-designed BMP-IIs. For the Wheeled FICVs, the Indian deference ministry has still not decided on who will be the Indian vendor.

The FICV project is patterned on the American defence procurement model, in which the Pentagon funds a development competition between two or more private companies for each new weapons system. So far New Delhi has usually nominated the Defence Research and Development Organization (DRDO) to develop such systems and the OFB to manufacture them.

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